Women are controlling an increasing portion of U.S. assets. Are you ready for the future?

Managing money has long been viewed as the domain of men, who held the bulk of assets. But the world is changing, and women are quickly gaining ground when it comes to financial status.  In 2009, women held about one-third of U.S. wealth — an amount expected to grow by 8 percent annually through 2014, according to The Boston Consulting Group.¹

By 2030, women will likely account for about two-thirds of U.S. wealth. The primary reason for this shift is sheer longevity. About 70 percent of baby boomer wives can expect to outlive their husbands and inherit the couple’s assets, often living another 15 to 20 years, according to the U.S. Administration on Aging.²

By 2030, women will likely account for about two-thirds of U.S. wealth.

Additionally, the income divide between men and women has narrowed, as more women earn college and graduate degrees, start businesses and move up the executive ranks. A study by Georgetown University’s McDonough School of Business found that women account for about 14 percent of executive positions at the largest U.S. companies and 5 percent at mid-cap companies.³ While still far outnumbered by men in the top ranks of corporate America, women’s representation in leadership roles has grown slowly but steadily since the 1970s.

About 70 percent of baby boomer wives can expect to outlive their husbands and inherit the couple's assets.

These trends have myriad implications for how families manage their wealth and plan for the future. Research has shown that women lag behind men in knowledge of financial products and investments and feel less confident managing their families’ wealth and estates.

Given this challenge, there are steps that women and their families can take to close the wealth-management gender gap and help ensure their financial situation is well positioned for the future.

Organize the Estate

It’s critical to make sure that financial accounts are set up properly and are accessible to both spouses in case of an unforeseen event or death. Both spouses should know the location of account numbers, contact details and other relevant information about bank and investment accounts, insurance policies and estate-planning documents.

Keeping updated records and reviewing beneficiary designations on all retirement accounts on a regular basis with a financial advisor can also help ensure that both spouses inherit the wealth efficiently and have the financial resources they will need if the other spouse predeceases them. These designations typically override the beneficiaries named in the will, if the two differ.

Understanding current estate-planning regulations also is critical. For instance, married women will want to know the basic steps they may need to take to make certain that their husbands’ individual estate tax exemption passes to them. They should also understand what, if any, estate taxes may be imposed by the state in which they live. They should have the contact information for the couple’s estate attorney, who can help ensure the necessary steps are taken at the correct time.

Find the Right Solutions

Since chances are good that a wife will outlive her husband, it’s worth exploring ways to transfer the wealth to her smoothly and prevent any potential complications. A number of estate-planning techniques can ensure that a widow retains the resources needed to maintain her lifestyle, as well as reduce estate tax obligations upon her husband’s death.

Trusts: Certain trusts can help reduce the surviving spouse’s estate tax burden. One example is an irrevocable life insurance trust, or ILIT.

Typically, the proceeds from a life insurance policy are included in the policyholder’s estate when calculating the federal estate tax. One way to avoid this is to set up and transfer ownership of the policy to an ILIT. If a husband predeceases his wife, the insurance proceeds can be deposited within the ILIT, where they are removed from the estate.

Before establishing an ILIT, you’ll want to consider a few provisions. The owner of the policy relinquishes control once it is placed in the trust. If an existing life insurance policy is transferred to an ILIT and the former policyholder dies within three years of establishing the trust, the proceeds may be subject to estate tax.

Another option is setting up a bypass trust. This is often used for assets that parents plan to pass on to their children after the second spouse passes away. This technique allows the deceased spouse’s estate tax exemption to be fully used while permitting the surviving spouse to use the assets during his or her lifetime. At the death of the second spouse, the assets of the bypass trust pass to the children free from estate tax.

Pensions and Social Security:
Employer pensions can offer several different benefit-payout options, including a single-life annuity that only lasts through the death of the employee and a joint and survivor annuity, which lasts through the lifetime of both spouses. Evaluate these elections to ensure both spouses will be financially protected and look for ways to maximize the payout.

Social Security retirement benefits will generally account for a small portion of many high-net-worth couples’ financial resources. Even so, it makes sense to understand how the payments are calculated and when they can start. For instance, the age at which the widow or widower of an individual who earned Social Security may begin collecting survivor benefits may differ from the age at which his or her own retirement benefits can begin.

Annuities: Given increased longevity, generating steady income that lasts a lifetime is an increasing concern for many couples and can help protect a widow who may lose some, or all, of her income after her spouse’s death. When purchasing an annuity, a couple or individual typically provides a lump-sum amount of money and, in exchange, receives a series of payments over the course of his or her lifetime.

However, annuities do carry costs and come in many structures. So it’s important to work with a trusted advisor to compare the options and determine which ones provide the right income strategy for your personal situation.

Understand the Basics

Beyond protecting their long-term financial health, it’s become ever more important that women have at least a broad understanding of how to manage their wealth. As more women live into their 90s, delay or forgo marriage or get divorced, the odds that they will need to fend for themselves financially at some point in life are increasing. 

This means understanding the risks and rewards of investing, asset allocation and estate planning. It also means feeling confident enough to make financial decisions independently.

A study by two University of California researchers found that, once financially educated, women often do as well as — if not better than — men in investing and managing wealth. When it comes to stock trading, the study found men tend to act more impulsively and, in the process, reduce their overall investment returns when compared to female investors.⁴

While there are many resources to help women become better financially educated and prepared, your Regions Wealth Advisor can help you and a spouse review your financial plans and estate arrangements to ensure they are positioned to protect and preserve your wealth today and into the future.